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Old 07-08-2007, 01:43 PM   #1 (permalink)
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Location: Donkey
House is worth less than I owe and relocating, need advice!

So our company is relocating us from suburbs of Detroit, MI to Tampa, FL.

Pretty good and all, except every single one of us who owns a home is in the situation where we owe more than our houses are worth since the market took a crap and everything is worth 20% less than what it should be.

The main issue I have is I refinanced 2 years ago to an 80/20 loan, and the ARM on the 80 just expired. Obviously since I owe more than the house is worth I can't refi or consolidate.

Renting at this point is sort of a last ditch option for me because I'd rather just get rid of the house entirely without the ongoing headaches and stress of tenants and all that. If I were to rent, I'd still have a $500 difference I'd be paying from what I pay out monthly vs what I could get in rent (pay out 1600, could get 1100 max per month).

Thing is, I could sell my home and pay off the 80% loan without a problem, but I'd still have the 20% to deal with, which I could easily afford on its own. Obviously the problem is that 20% loan is secured and tied to the house.

Can banks take that 20 loan and convert it to unsecured without any probs? If so, what would the interest/terms be like?

Could I write the loss off on taxes?

What's the typical path that someone in my situation takes? (Note: I did ask a realtor about this, but I feel that they have their own agenda, so I figured I'd ask a rather unbiased source)
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Last edited by Stompy; 07-08-2007 at 01:54 PM..
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Old 07-08-2007, 02:23 PM   #2 (permalink)
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You should ask your bank or a personal finance specialist. Thats as close as I can come to having advice for you.

I'm afraid a lot of people are in for rude awakenings when the housing bubble truly bursts.
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Old 07-09-2007, 07:44 AM   #3 (permalink)
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Thanks, ratbastid.

I had planned on talking to the banks, but figured I could get an idea of what to expect in the event anyone else had this same situation just because I admittedly don't know much about this stuff. I'd like to avoid the situation of banks or other loan officers getting me into situations that I don't really wanna be in just so they can profit a bit more.

In this day and age, it's increasingly difficult to find a person you can trust that will look out for you and let you know things you should or should not avoid.

That's actually part of the reason why I'm in this spot because when I had refinanced 2 years ago, it was to get out of the ARM I was in. I wanted a 30 year fixed. Lo and behold, they slipped something in and didn't notify me of the fact I was getting into yet *another* ARM. I didn't even notice until a girl I was dating, who worked for a realtor, reviewed my HUD and mentioned, "You know you have another ARM, right?"

Needless to say, I was pretty pissed off. Yeah I signed the docs and everything, but since I don't know much about this stuff, it's not hard for them to slip that in.

I think in this situation they'll try to push on me options that THEY want to sell me, not options I SHOULD be getting, if that makes sense.
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Last edited by Stompy; 07-09-2007 at 07:46 AM..
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Old 07-11-2007, 08:59 AM   #4 (permalink)
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Well I am no expert in the area but I would assume they would be inclined to let it 'convert' to unsecured, I mean if the other option is you simply defaulting on it.

Edit: Speak with an expert. Speak with the bank sure but might also want to talk with a third party, any fee they charge may be well worth it.
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Old 07-17-2007, 05:15 PM   #5 (permalink)
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Have you considered looking for another job in Michigan?

Seriously, relocating costs enough without having to take a loss on your house. Stying put and taking a job at 80% of your present salary might even be a more fiscally responsible option over the next 3 or 4 years, unless you're already living at the extent of your means.

If you go, think again about renting - losing $500/mo waiting for the house to sell is better than losing $1600/mo.

Trust me - I paid two mortgages for almost a year a couple of years back - I wouldn't wish that on anyone!

If you can sell before you leave, you can always find some bank willing to refi the 20% as unsecured, but expect a much higher interest rate (and the 30 years will start all over again at payment 1 of 360).

I hope everything works out - good luck!
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Old 07-17-2007, 05:36 PM   #6 (permalink)
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Quote:
Originally Posted by yournamehere
Have you considered looking for another job in Michigan?

Seriously, relocating costs enough without having to take a loss on your house. Stying put and taking a job at 80% of your present salary might even be a more fiscally responsible option over the next 3 or 4 years, unless you're already living at the extent of your means.
The problem with this is that the group of available buyers in Michigan is shrinking, not growing, unlike other parts of the country. The housing bubble has well and truly burst there. He isn't likely to recover his investment in Michigan, period. His house is more likely to continue to lose value, based on the current state of the market in Michigan, as well as the employment market in Michigan (which is shrinking at the fastest rate in the country). MI also has an exceptionally high rate of bank foreclosures, which certainly doesn't help the property market any.

My advice? Go with ratbastid's. Ask people who know more than we do--your bank or a personal finance specialist. But, Stompy, you are more likely to recoup your loss in Michigan via a gain in Florida, where property values continue to rise despite the burst of the housing bubble, and the employment market is healthy. Get out of MI while you can!
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Old 07-18-2007, 03:24 AM   #7 (permalink)
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Everything works in cycles. There never was a "bubble" in MI. Bubbles were in CA, DC - places like that with double-digit growth. While the population in Detroit is shrinking there is far too much infrastructure there that Toyota, Honda, etc., will be able to purchase for a song. And then the cycle continues.

You should absolutely consult an expert and get several opinions. You will pay a higher rate for an unsecured loan of the amount I suspect you will need. And you don't really know what you home is worth until you try to sell it.

My big question is how could you sign a mortgage agreement and not understand the terms? I guess this will be a good learning experience? That and always ask the price before you order!

You won't be able to deduct the loss on your home on your taxes but you can deduct rental losses and all cost associated with the rental - if I'm not mistaken -including trips to MI to check on things.

Good luck!
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Old 07-18-2007, 11:13 AM   #8 (permalink)
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Another potential source of information would be someone at a Title and Escrow company. They are a third-party that has a hand in just about every real estate transaction that happens. They don't work for the realtor, and they don't work for the bank. They do work with both, and get a good look at what's really going on in a particular market. Someone there should be able to give you some ideas of what others in your situation have been doing.
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Old 07-19-2007, 08:36 AM   #9 (permalink)
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By the way, I live in the Detroit suburbs and every time I look around there's another bank being built. New houses are still being built. the MGM is nearly ready to open a new hotel, as is the St. Regis and another downtown hotel formerly the Ponchertrain. Hospitals are built built like crazy all around. Compuware recently finished their headquarters downtown. Ford Field opened just a few years ago. New hotels are being built down river and in Auburn Hills.

Something is going on around here because this place isn't going away.
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